Declining R&D Budgets Drive Outsourcing of Drug Discovery Functions

NEW YORK, NY--(Marketwire - Jun 6, 2012) - Once an activity kept in-house at global pharmaceutical companies, the discovery of new compounds with a possible pharmacological effect is now increasingly handled by outside firms, according to Kalorama Information. The healthcare market research publisher said that companies are now routinely outsourcing a number of core functions including clinical trial management, manufacturing, and, increasingly, portions of the drug discovery process. With R&D expenditures declining, companies seek these services with the hope of developing more potential drugs out of limited spending dollars, creating a $9.4 billion market for drug discovery outsourcing in 2011.

"It is a high-cost, risky business because only a fraction of the therapeutic targets selected for study will actually yield products that obtain regulatory approval from the FDA," said Bruce Carlson, Publisher of Kalorama Information. "The average drug can take 10-plus years to progress from the discovery phase to the clinic, with only one compound out of 10,000 evolving into a viable product."

R&D budgets have been declining or at least not growing in recent years, according to the report. PhRMA (Pharmaceutical Research and Manufacturers Association) members' R&D spending dropped just over 2% to $49.5 billion in 2011. This will force much of the advanced work to be moved to outsourcing firms to handle such as target identification and validation, early toxicology or high throughput screening. Increasingly, companies in Eastern Europe or Asia are handling this work and they are obtaining jobs both for the cost savings they can provide and for their expertise. The report indicates that drug discovery has become increasing complex since the 1990s as a result of advances in molecular biology and the emergence of new-generation biological therapies. These advances, plus the emergence of new technologies, have made it unsustainable for pharmaceutical companies to undertake all drug discovery functions in-house. Therefore, the industry has chosen to outsource core drug discovery functions more frequently.

These factors should bode well for outsourcing firms, according to Kalorama Information. The global market for outsourced drug discovery services was up 15% from last year despite the current unsettled economic environment, and it remains robust with an optimistic outlook going forward.

Kalorama Information's report, Outsourcing in Drug Discovery, provides breakouts of revenue estimates by function performed. It also details the trends in the outsourcing industry, provides optimal partnership strategies and profiles key companies in the market.

About Kalorama InformationKalorama Information, a division of MarketResearch.com, supplies the latest in independent medical market research in diagnostics, biotech, pharmaceuticals, medical devices and healthcare; as well as a full range of custom research services. We routinely assist the media with healthcare topics. Follow us on Twitter, LinkedIn and our blog.